8 Reasons P2P Loan Platforms Are the Hottest Asset Class Right Now
So far, gold, real estate and fixed deposits have remained India’s sweethearts when it comes to investments. Some have included mutual funds into their diet, based on their risk appetite. Only the esoteric go after stocks, which has almost always been volatile. Except for mutual funds, which can give reasonable returns in the longer run, the rest aren’t always good news. In fact, the recent turn of events not in favour of these asset classes has paved the way for P2P lending platforms to shine.
Basically, P2P platform puts both, investors, and borrowers onto the same channel. The former is enabled to choose who they lend to, based on the latter’s credit score – A combination of E-KYC, CIBIL, Bank data, Mobile data, ITR data, social data, and psychometric data. But it’s that simple really – just pick & invest. Here’s why investing in them is an A-class idea:
1. IT SUITS EVERY TYPE OF INVESTOR
This is ideal especially when you’re a beginner. Whether you like to take risks, or tread on safer pavements, P2P lending delivers anyway. Those with a low risk appetite can make about 16%, while those who take high risk earn closer to 22 percent. But of course, reaching this level of returns comes with time, more money, and smart diversification.
2. YOU’RE IN CONTROL.
This is one of the best attributes of P2P lending. You know what you’re getting into, who you’re investing into. But more importantly, you have the option to ask queries and clarify any doubts that may linger. Contractually, borrowers are legally bound to return the money, therefore loan defaults can be subject to legal action by the investor. Can you imagine doing this with a blue-chip company that goes bankrupt? Well we suggest you don’t try.
3. IT’S AUTOMATED. IT’S EASY.
We even mentioned this earlier. It’s easy to understand and operate. Online platforms like Tachyloans automate the entire
flow – verification, payments, updates, and such. Even the entire due diligence process is undertaken by the platform, along with documentation at every step of the way. And these platforms have relatively lower barriers to entry, only the investor has to have an annual income of Rs. 10 Lakh at least.
4. REDUCED OPERATIONAL COSTS. HIGHER RETURNS.
Since investors directly connect with borrowers on the platform, operational costs incurred from brick & mortar branches is non-existent. This manifests in the form of higher returns for investors, and lower costs for borrowers, except for the minimal costs charged by the platforms. In fact, borrowers need not provide any collaterals here.
5. STEADY CASH /RISK MITIGATION
The principal & interest comes to you every month, hence there is a steady cash flow. And by further re-investing them, you can get better returns. By diversifying across different borrowers with varying credit scores you can mirror the default rate and cover for losses. P2P platforms are the only asset class capable of providing genuine diversification for a portfolio.
6. IT’S SOLID. IT’S UNCORRELATED
P2P lending has not seen a negative year of returns so far. Anywhere around the world. Public markets are increasingly correlated, and when one asset class falls, the rest follow suit. But with P2P lending you can invest across economic and stock market cycles, since they are immune to market volatility.
7. IT’S TECHNOLOGY ENABLED .
PAST MEETS PRESENT P2P lending is the perfect blend of the past and the present. Technically, it’s been around since before stocks, equity and bonds even came into existence. An unorganised market for decades, until technology entered the mix. And voila! Thanks to P2P platforms, it became organised, regulated, and has come a long way in just a little more than a decade. It’s gradually becoming an unstoppable alternative asset class, and only time will tell how far it can go.
8. YOU CAN MAKE A DIFFERENCE.
You can be a part of the financial inclusion movement. There are more in this country looking for loans of cheaper credit, due to lack of access and awareness. It can help bring about positive changes among your ‘peers’ (as it implies), rather than large corporates.
P2P lending platforms are currently the best investment instruments. Join the movement before it’s too late!